Saving up to get in business

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Last updated 05:00 16/07/2012

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Small Business

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Q: How does someone with potential and commitment but no capital or sufficient income to save up get into business?

A: You have basically described a vast multitude of startup companies. Most will find themselves surviving on potential, commitment and sheer resolve at numerous stages throughout the startup business journey.

There are a number of options but they all boil down to the core elements of what will attract capital to your business. You need to quantify the potential you have. That goes a way to demonstrating the commitment you have and speaks volumes to anyone who might look to solve the funding problem you have.

Build a picture of a market that wants to buy what you are selling, and bring together a team which has the capability to deliver to that market. Investors buy into three things: team, market, product - in that order.

Too many entrepreneurs decide they cannot do anything until someone invests $1 million in their idea. Unfortunately that idea is not worth even $100 until you do something with it.  

The largest three sources of funding for small businesses the world over are personal savings, friends and family, and credit cards. Eight out of 10 never need anything more than that. Of course to really scale fast you are likely to need a bundle more than that, but thinking creatively about funding from the outset is a good place to start.  

To build momentum in your own business, work out how many people are willing to buy from you, prove it through some market research and build a plan for how you are going to deliver on it.

The one thing early businesses have to trade is equity. If done well, this can attract some of the resources you need costing little or no cash.

From there you can canvas support from somewhere like Creative HQ or another business incubator, or seek people that may have the understanding of the market you want to work in, and some capital or time to invest, but without the freedom to commit fulltime.   

Steve O'Connor is CEO of Creative HQ, Wellington's entrepreneurship and startup incubator.

A: Become a humble expert - developing skills and ideas that are in rare supply. Participate in industry and start up forums to be noticed. Find a business partner who has capital, but not your skills, and you work well with. Form a business together and be willing to work for low/no pay and earn sweet equity i.e shares in lieu of salary and dividends. Then over time you will earn equity in the company.

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Mark Robotham - SME business adviser. Website: growthmanagement.co.nz

- If you want to ask our experts a question, please email jenny.keown@fairfaxmedia.co.nz

- BusinessDay.co.nz

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